By Rick Tetzeli

(FORTUNE Magazine) – A year after they helped revive the University of Vermont College of Engineering and Mathematics, General Electric, IBM, and other companies with local operations are reaping the benefits. Instead of closing down, the school is turning itself into an integral part of the high-tech corridor around Burlington, Vermont. Business leaders protested when they learned of a plan to close the school to help reduce the university's projected $16 million deficit. Recalls Bernie Tolmie, CEO of Vermont Electromagnetics: ''We wrote letters, met with college officials, went to the media, and did everything we could to show that this was a necessary resource.'' The school survived. Recalls dean George Pinder: ''When the business community came to our rescue, we became much more aware of their needs.'' Since then, he has worked with Tolmie and others to develop projects that give students hands-on experience and businesses affordable help. One group of students is working with IBM-donated computers to design models for cleaning up toxic groundwater at IBM's local semiconductor plant. Part- time graduate students Carl Blow and Sean Marble, who this summer developed a tool to measure groundwater for Ciba-Geigy of Switzerland, have used the proceeds to start their own business. Closer to home, graduate students Timothy Ambrose and James Lehnemann are developing a robotic machine for Vermont Electromagnetics. The device (see photo) links cable no wider than three hairs with tiny circuitboards for use in ultrasound. Says a triumphant Tolmie: ''R&D is getting so expensive for small and medium-size businesses trying to compete in a global economy. We just couldn't afford to lose this school.''